Money supply, bank lending up in July

MONEY supply and bank lending gained in July from the previous month and year-on-year, Bangko Sentral ng Pilipinas (BSP) data showed on Wednesday.

Domestic liquidity or M3 expanded by 13.1 percent in July from a year earlier and faster than June’s 12.4 percent to P8.8 trillion. Seasonally adjusted month-on-month, M3 grew by 0.1 percent.

“Money supply continued to expand on account of sustained demand for credit,” the central bank said in a statement, noting the robust expansion of M3 indicates that money supply “remains adequate to support economic growth.”

An analyst said the higher liquidity in July could also be traced to the surge in portfolio investment.

The bulk of bank loans during the month went into real estate activities; electricity, gas, steam and air-conditioning supply, and wholesale and retail trade; and repair of motor vehicles and motorcycles.

Lending to the public sector rose by 25.4 percent, slightly faster than the 25.3 percent recorded in the preceding month.

Net foreign assets (NFA) in peso terms increased by 12.5 percent from June’s revised 11.1 percent, the central bank said. Its own NFA position continued to expand on the back of robust foreign exchange inflows mainly from overseas Filipinos’ remittances, business process outsourcing receipts, and portfolio investment.

The NFA of banks increased as foreign assets expanded because of investments in marketable debt securities and interbank loans, while liabilities fell due to lower payments made by foreign banks to their Philippine branches, the BSP said.

Bank of the Philippine Islands (BPI) Vice President and lead economist Emilio Neri Jr. said it was possible that
the surge in portfolio inflows in local equities and the bond markets supported the higher domestic liquidity in July.

These inflows, he noted, have outweighed the liquidity impact of bigger term deposit auctions by the BSP in the same month.

“The expansionary peso liquidity impact of BSP’s purchases of US dollar in the spot market was big enough to bring its gross international reserve to nearly $86 billion and overshadow the mopping up impact of the TDF,” he also noted.

Lending up slightly
Bank lending rose just slightly in July, expanding at 17.7 percent pace year-on-year from 17.6 percent in June.
Including reverse repurchase placements (RRPs) with the central bank, lending growth rose by 16 percent in July from a year earlier.

Lending for production activities, which accounted for over 80 percent of the aggregate loan portfolio, grew by
17.4 percent, slightly slower than 17.7 percent in June.

“Bank lending to other sectors likewise expanded during the month, except for public administration defense, and compulsory social security, defense and compulsory social security which declined by 5.4 percent,” the BSP said.

Loans for household consumption accelerated by 20.6 percent compared with 18.7 percent in June, reflecting credit card, motor vehicle, and salary-based general-purpose loans, which offset the decline in other types of household loans.

“Going forward, the BSP will continue to ensure that domestic credit and liquidity conditions will keep pace with overall economic growth while remaining consistent with its price and financial stability objectives,” the central bank said.